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FRM Part II · FRM Exam Part II · Case Study: Financial Crime and Fraud

A bank wants to reduce fraud risk by acting primarily on the 'opportunity' side of the fraud triangle, since it has little influence over employees' personal finances or attitudes. Which measure best targets opportunity?

Dual authorization with system-enforced segregation of duties best targets opportunity because it removes a single person's ability to initiate and conceal a fraudulent payment. Assistance programs address pressure, and ethics training and tone-at-the-top messages address rationalization, so they act on other triangle sides.

  1. AEnforcing dual authorization of payments above a threshold with system-enforced segregation of dutiesCorrect
  2. BOffering employee assistance programs for staff in financial hardship
  3. CRunning annual ethics training on the code of conduct
  4. DPublicizing a CEO message that fraud is never acceptable

Explanation

Preventive and detective controls such as dual authorization and segregation of duties directly remove the ability to commit and conceal fraud. Assistance programs address pressure, while ethics training and tone messages address rationalization.

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